What will happen to North Park theater?

The fate of the North Park Theatre may be decided this week when a judge rules on a proposal by David Cohen, who owns and operates the West Coast Tavern at the front of the theater and the Uptown Tavern in Hillcrest. He proposed a settlement earlier this month in which he and his company, DCMM, would take over the 731-seat, 32,000-square-foot theater and its operations. Essentially, the slate would be wiped clean and the Lyric Opera would cease to exist.
— Gerald McClard

The fate of the North Park Theatre may be decided this week when a judge rules on a proposal by David Cohen, who owns and operates the West Coast Tavern at the front of the theater and the Uptown Tavern in Hillcrest. He proposed a settlement earlier this month in which he and his company, DCMM, would take over the 731-seat, 32,000-square-foot theater and its operations. Essentially, the slate would be wiped clean and the Lyric Opera would cease to exist.
— Gerald McClard

It has all the elements of one of the productions the now-bankrupt Lyric Opera of San Diego used to stage at the Birch North Park Theatre: conflict, disruption and dysfunction.

But the curtain could come down as soon as this week on the often-melodramatic bankruptcy proceedings that have engulfed the Lyric Opera, the owner of the historic North Park Theatre, for more than a year and a half.

David Cohen, who owns and operates the West Coast Tavern at the front of the theater and the Uptown Tavern in Hillcrest, proposed a settlement earlier this month in which he and his company, DCMM, would take over the 731-seat, 32,000-square-foot theater and its operations. Essentially, the slate would be wiped clean and the Lyric Opera would cease to exist.

A bankruptcy court judge could rule on Cohen’s proposal in a hearing scheduled for Wednesday.

Cohen, when reached by phone, said it was “premature” to talk about the legal proceeding or his potential plans for the theater.

The president of the Lyric’s board of directors, Roberto Cueva, ﻿said “too many things are in flux” and that he “couldn’t speak at this time.” Lyric management was unavailable for comment.

Cohen and DCMM’s petition, however, says they were approached by a Lyric representative about a possible resolution prompted by financial and “operational problems.”

Cohen is in a unique position, as his West Coast Tavern is a tenant of the Lyric Opera, but he also owns the $4 million mortgage note the Lyric took out in 2006 and later refinanced (the note was sold to Cohen in 2012 for an undisclosed amount).

“Lyric Opera is out of funds, out of options and seeks help,” according to court documents filed by Cohen’s attorney, Jean Heinz. “DCMM has agreed to a settlement that allows a smooth transition as to both the property and the operations.”

The Lyric’s attorney, Christine Baur, sees it differently. In court filings responding to the proposal, she identifies the Lyric Opera’s representative as Cueva, who she states acted without advice of counsel and without the consent of the Lyric’s board, making any agreement he reached with Cohen invalid.

She asserts that to the extent that the Lyric is in financial distress, “DCMM should be held accountable.” She claims DCMM had not paid the Lyric the “alcohol sales percentage under the lease amendment for the last three and a half years,” totaling about $700,000. And after purchasing the Lyric’s $4 million note, Cohen immediately tried to get permission from the court to foreclose on the loan, which caused additional legal expenses and complications for the Lyric.

“DCMM has sought to take advantage of the Debtor at every turn,” the Lyric’s court papers state. “DCMM’s continued attempts to mislead ... the Debtor should not be tolerated.”

The not-for-profit Lyric Opera, under the management of its founders Jack Montgomery and Leon Natker, purchased the now 84-year-old theater in 2005 for about $12.5 million in a complex arrangement with the city and developer Bud Fischer. Much of that amount was covered by redevelopment funds and donations (including $1 million from the Stephen and Mary Birch Foundation) — and that $4 million mortgage — but the company still had nearly $1 million more to raise when it moved in.

Within six months of the theater’s opening celebration in late 2005, Natker, the general director, was concerned about “sluggish fundraising.” By 2008, the Lyric had taken out an additional $400,000 line of credit and by early 2011, it put the theater on the market with a price tag of about $5 million. The company planned to continue producing shows and rent the theater back from the new owners.

Although there were claims of buyer interest and an offer of $4 million that was not accepted, the theater continued to suffer setbacks, ending its fiscal year in June 2011 with a deficit of $250,000 on an operating budget of about $1.5 million (according its most recent federal 990s). In October 2011, Natker and Montgomery “retired” and the Lyric declared Chapter 11 reorganization bankruptcy. Two weeks later, it canceled its season.

During the bankruptcy, the Lyric has continued renting the theater to local promoters and arts organizations, including the San Diego Musical Theatre (whose production of “Chicago” is now on the North Park stage). But the Lyric’s reorganization plan is to sell the theater “to a purchaser who will continue the (North Park Theatre) as a viable and vibrant venue for the North Park community,” according to court documents filed in November.

Response to a renewed real estate marketing campaign was promising, and Baur said last week ﻿that the Lyric is waiting for a response to a counteroffer it made to a potential buyer.

Meanwhile, Cohen claims in recent court documents that the Lyric no longer has sufficient funds for upkeep or operations, even though it has rentals scheduled through May 2013. By taking over the theater and its operations, Cohen and DCMM assert, they would insure those future bookings could proceed.

Baur, however, has asked the court to deny Cohen’s settlement motion and given the “dysfunctional state” of the Lyric’s management, appoint a “court-supervised fiduciary” to operate the Lyric and oversee any potential sale or agreement.

If the court is unwilling to appoint a new agent to supervise the theater, then Baur is asking to withdraw from the case. That request is a first, she said, in the history of her firm, which specializes in Chapter 11 bankruptcies.